NBC Universal Now Says It Should Be Apple's Responsibility To Stop Piracy

from the oh-please dept

Sometimes you wonder how the folks at NBC Universal get anything accomplished, when they seem totally unable to accept responsibility for the market challenges they face, and demand that everyone else fix NBC Universal's business model problems. Remember, NBC Universal has been the main supporter of the idea that ISPs should be responsible for stopping any unauthorized transfer of content. But why take chances on having just one outside party prop up your business model?

Now, NBC Universal's "chief digital officer," George Kliavkoff, is saying that it should be Apple's responsibility to stop unauthorized usage by building special antipiracy filters into iTunes. Yes, iTunes -- the service that plenty of people use in order to legally purchase content. However, since iTunes is also the connection that most people use to manage their iPod content, NBC Universal thinks Apple should somehow block the ability to get non-authorized material onto the iPod. How would they do that? How would they know that a song is authorized vs. legally ripped? Don't bother asking tough questions like that. After all, if NBC Universal actually knew how to answer them, it wouldn't be telling everyone else that they're required to fix NBC Universal's broken business model. And, of course, it apparently hasn't occurred to NBC Universal execs that if Apple actually agreed to this (which seems extremely unlikely), it would just push people to jump to other solutions to manage their music, such as Songbird.

Kliavkoff then goes on to say: "It's really difficult for us to work with any distribution partner who says 'Here's the wholesale price and the retail price,' especially when the price doesn't reflect the full value of the product." Note the careful choice of words here. Remember, we were just discussing how the entertainment industry is trying to appropriate all value that is associated with content (even if that value is because of some other vehicle) back to the content owner. Kliavkoff's statement also shows a confusion over the difference between price and value -- and because of that he seems to be assigning all the value to the content and almost none to the service and technology Apple provides (sound familiar?). Coming from a "chief digital officer" that seems troublesome for the company's digital strategies. Then again, perhaps it shouldn't be a surprise. Companies that have a "chief digital officer" are already in trouble because they're sectioning off "digital" as if it's some separate function, rather than a key component that will impact all aspects of the business.

What NBC means by stopping piracy of course is tightening the restrictions on iTunes DRM to remove the limited abilities of consumers. For instance, NBC wants the ability to control whether a clip is transferable to an iPhone or an iPod.

Basically, NBC wants Apple to institute the same restrictions that have caused all the other content providers to fail miserably.

Kliavkoff even referenced the recording industry when complaining about pricing:

The music industry guys would have something to say about how the pricing has affected their product over the last few years

Of course, he blissfully ignores the fact that Apple essentially rescued the labels from the constant failures of their own online ventures, such as PressPlay and MusicNet.

next

Pricing

"'Here's the wholesale price and the retail price,' especially when the price doesn't reflect the full value of the product."

Well, IMHO they have a point, in that in nearly every other industry the publisher or manufacturer sets the wholesale price, upon which the retailer bases the retail price. And they're not trying to "appropriate" all of the value, otherwise there would be no difference between wholesale and retail prices. Why isn't Apple's value reflected in that differential? (Or in the margins of an iPod?)

The movie industry charges, say $18 for a first-release DVD, and over time that drops to $12, and then $9, and then it may hit the $5 grocery bin. Why is music any different? Why isn't, just for the sake of argument, the newest pop song $3, and catalog music a quarter? Isn't the latest, most popular song in fact more valuable? Isn't demand higher?

Charge more, and people will either pay the higher price, or they won't. If they don't, the studio can adjust prices accordingly, just like every other business.

Re: Pricing

I agree. I think it is silly to charge $1 for every song regardless of the demand for the product. I love Led Zeppelin, they are my favorite rock band (showing my age, I know). But even though I am a fan I won't pay $1 for music that is basically 30+ years old. It simply isn't worth it to me. The wholesaler should be able to set the wholesale prices, and the retailer should markup whatever they feel is appropriate. The market will dictate whether the price accurately reflects the combined value of the product and the service.

That being said, the music industry needs to recognize they can't set a flat wholesale price for every song either. They need to discount the deep cuts in their catalog.

Re: Re: Pricing

Why should it matter if the music is old? Does it rust or go bad? It's not something you display on your mantel. If you want to listen to it then it's just as valuable as any new song you listen to. If new music is valuable it will sell more. More sales at $1 means more profit. Unpopular music sells fewer copies for the same price and makes less profit. I just don't understand why popular music should cost more. If anything, music with large bands and orchestras must cost more and a fellow strumming on a guitar and tooting a harmonica should sell 5 cents a copy, but the music industry don't do that, do they?

Re: Pricing

"Isn't the latest, most popular song in fact more valuable?"

No it's not. Why would it be? There are many older classical recordings that are far more valuable than any recent ones. And the new DVD prices are set higher even if they are not popular. Besides, what does popularity have to do with selling digital media? It's not like the law of supply and demand matters.

Re: Pricing

Well, IMHO they have a point, in that in nearly every other industry the publisher or manufacturer sets the wholesale price

They had every opportunity to set their own prices when they were trying to set up their own distribution services. If they want access to iTunes customers, for better or worse they have to play by Apple's rules. The standardized pricing and relaxed DRM were set up to eliminate the two main factors that caused the recording industries previous online efforts to fail. The fact that those are the two things NBC is complaining about should tell you that content providers still haven't learned their lesson.

The content producers are still perfectly capable of setting their own pricing. All they have to do start their own music service and potentially lose their built-in iTunes customer base if they implement DRM. They're also going to have to fight against the customers' now built-in expectations of pricing.

It seems to me if artists wants to be compensated more they should perform more concerts. They are already being compensated enough from recording an album in a couple of weeks and collecting royalties for 50 years (or is it 75 now?) How much value is there in a recording to begin with. I believe the price they already charge for a physical or digital copy is more than fare.

Re: Pete

"They are already being compensated enough from recording an album in a couple of weeks and collecting royalties for 50 years (or is it 75 now?)"

Don't disagree that the royalty length is too high, but don't underestimate effort it takes to record that album; months not weeks. The rental costs for studio space for that time alone can be huge, and thats not forgetting the associated capital costs in equipment and production. Generally, these costs come out of the artists royalties.

Re: Bad NBC-U, BAD!!!

"is it me, or does Songbird look oddly similar to iTunes"

From reading up on that program, that seems to be quite intentional.

And I'd like to think Mike for pointing that program out to me. I've been looking for an iTunes replacement. Songbird doesn't seem to be up to snuff, but it's only version 0.5. It shows quite a bit of potential.

Re: Pricing

"It's not like the law of supply and demand matters."

Actually, it does, but here the price/value relationship matters more. They have a "product" that's in demand. Because more people want it, they may be able to set a higher price, because more people may be willing to pay that price in order to have that music now, and to have it when everyone else has it, is listening to it, and is talking about it.

in short, their product has both value and a price. You, in turn, decide if that value is worth the price asked.

You're implying that bits are just bits. They're not. I have a 15GB file that's full of bits I'd be happy to sell you. But since all of the bits are random, I doubt you're going to want to pay me my asking price of $20.

But let that be the entire last season of Heroes, and you might reconsider. If you're a Heroes fan, and you missed that last half of the season when you were out of the country, $20 may seem like a bargain.

Price is determined by Apple

Who cares if a song is popular or not, Apple determines the price it wants to sell the music at. Look at Napster in which you pay a monthly fee. Napster doesn't care what you download, as long as you pay the monthly fee. As for Apple, they don't care how new a song is or how old, music is like art, it's only valuable to the listener. The only reason DVDs drop in price is because they (merchant) want to move the product and get it out of inventory and the price is dictated by the merchant, not the wholesaler.

No, don't complain!

Then they *might* realize how they're screwing up. If you just let them screw themselves, eventually they'll fail completely and the empire will fall, leaving people with brains behind to pick up the pieces.

The only reason that they haven't fallen already is that the mainstream public doesn't realize what's really going on here. But if you screw with thier iTunes, they sure will.

Re: Actually, Why Not

> Given how aggressive Apple have been about protecting their
> own closed systems in other ways, I'm sure they can come to
> some deal with NBC and whoever else wants this kind of
> "protection" ...
This might be the most ridiculous comment I've read here.

Letting Record company set the wholesale price.

I think many of you are missing the point here. The record company does not want to lower the price of older music, they want to raise the price of newer music. At $1 a song, getting all songs from a CD (if all were worth buying) would cost the same as a CD. This is already high priced (to me at least). I would love to get old songs for $0.25, I would buy music at that price on a whim...."Gee, I recognize that song I just heard a bit of from the car next to me. Let be buy to here the whole thing." Why not. Even if I never play it again. Just don't believe the record (and movie) companies would ever let it happen. So till it does, I just go without..... If everybody adopted that attitude, the record companies would not only go under, they would be trying to get ridiculous laws protecting their businesses.

Reality

The reality of the matter is that using DRM is like trying to catch smoke with your bare hands - the consumers just seep through. When the DRM is unrestrictive, no-one notices; the average person just puts it on his iPod and doesn't care that a no-name won't support it. This way, only the hardcore geeks bother to actually circumvent the DRM.
But when the DRM stops even the average user from using it, he's going to start looking for ways around it. E.g. downloading it. But if he's already bought it, he has a license to use it, so downloading it may not actually be illegal...unless it is considered "circumvision of DRM"...

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